Security giant Tyco International and manufacturing multinational Johnson Controls will save $150m (€138.5m) in taxes annually when they merge and move their combined headquarters to Ireland.

Cork-based Tyco, valued at $13bn, specialises in fire protection systems while US-based Johnson Controls, which has a market value of $23bn, makes heating and ventilation systems and car batteries. Although Tyco moved its global headquarters from Switzerland to Cork in 2014, the company was founded in the US and has the majority of its operations there. Its operational headquarters is in Princeton, New Jersey.

The two companies announced yesterday that they are to merge in a deal that will place the combined company's headquarters in Ireland. Johnson reported revenues of $37.2bn in its 2015 financial year, while Tyco's was $9.9bn.

Under the terms of the agreement, Johnson Controls will own about 56pc of the merged business and receive a cash payment of about $3.9bn. Tyco has secured a $4bn bank facility to finance the cash aspect of the deal.

The combined company will continue to trade on the New York Stock Exchange. It will maintain Tyco's Irish legal domicile. The primary operational headquarters in North America for the combined company will be Milwaukee, where Johnson is based.

The merger will create savings of at least $500m in the first three years, the companies said.

They added that the transaction is expected to create "at least $150m in annual tax synergies". The companies didn't provide an exact value for the merger.

The deal marks another tax inversion involving an Irish-headquartered company. An inversion is when a company shifts its legal domicile to a lower-tax country while usually keeping its material operations in the country of origin. Ireland has a 12.5pc corporate tax rate compared to about 35pc in the US.

The new company, to be called Johnson Controls Plc, will be headed by Johnson Controls chief executive Alex Molinaroli for 18 months after the closing of the deal. Afterwards he will be succeeded by Tyco CEO George Oliver.

Johnson Controls has been preparing to spin off its automotive seating and interiors business and said yesterday that the spinoff was on track for early in the first quarter of 2017.

Shares of Johnson Controls have lost more than a quarter of their value since the start of 2015, while Tyco's shares have fallen by over 30pc. Johnson Controls' shares were down 0.8pc at $35.30 in pre-market trading, while Tyco's were up 10pc at $33.65.

Tyco was broken up into three companies after turnaround expert Edward Breen took the helm from former chief executive Dennis Kozlowski, who was convicted in 2005 of grand larceny, securities fraud and other charges.

Under Breen, Tyco spun off its electronics and healthcare businesses in 2007. In 2012, Tyco was again broken up into three pieces, while its commercial fire and security businesses combined into "New Tyco". (Additional reporting by Reuters)